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I used to lend money to my friends — at outrageous interest rates.
For example, one time a buddy needed tools in order to get a construction job, so I loaned him $200 for a charge of $5 per week in interest, which works out to a rate of 160% annually!
Did I use my friend to make money? You bet. On the other hand, he used me to make money too; he got a good job at the cost of $20 in interest (he repaid me after 4 weeks).
And I wouldn’t have loaned him the money to go gambling or do anything stupid like that.
I’ve also used friends to save money. For example, I hired a friend to help me with a plumbing job, saving me much of the cost of using a professional plumber while putting some cash in my friend’s pocket. That’s a win-win transaction.
Hey, you like to help your friends out when you can, right? And they probably feel the same way about you. In any case, if you have any qualms about looking to your friends for opportunities to make or save money, just be sure you both benefit.
With that win-win approach in mind, here are 10 ways to use your friends to make or save money…
1. Sell Your Stuff To Your Friends
Before you go go to all the work of having a rummage sale, or use Craigslist to invite strangers into your home to look at the couch you want to sell, check with your friends!
I’ve sold everything from furniture to cars to friends, saving me the trouble of advertising, dealing with phone calls, and other hassles that go with the usual ways of selling things.
You might even sell your stuff for a little less than normal (win-win, remember?), and be happy to avoid the trouble of selling to strangers. Call your friends and spread the word on Facebook, which brings us to our next strategy for making and saving money…
2. Ask For Help From Facebook Friends
Social media has its drawbacks, but it’s also one of the most useful things to come along if you use it correctly. And one of the best ways to use it is to ask your friends on Facebook for advice before you buy or sell something.
For example, my Facebook friends have asked for advice on where to get a car repaired, where to sell a snowmobile, and where to sell concert tickets that they couldn’t use. When I recently mentioned on Facebook that I wanted to find an inexpensive simple action camera, a friend sent me one for free!
One of my Facebook friends even raised over $1,000 toward a used car purchase, just by posting his (somewhat sad) story and asking for donations!
3. Use Friends To Find A Job
One survey suggests that 85% of jobs are found by networking, and what better place to start the process than with your friends? Over the years, by simply talking to my friends I’ve found jobs at a newspaper, a casino, in construction, and many more.
If you have friends working at places where you would love to work, start by calling those friends first. If you know what kind of work you’re looking for, tell all of your friends.
But look beyond close friends for help. Some research suggests that you’re more likely to get a job through “weak ties,” which include acquaintances and Facebook “friends.”
In part that’s because people outside your closest circle of friends are more likely to know of opportunities that you didn’t already know about (after all, you tend to already know much of what your closest friends know).
You also increase your odds of being hired if a friend recommends you to an employer, so ask for that bit of help if you know someone who is working where you plan to apply.
4. Do A Business Deal With A Friend
A friend once came to me and pitched an idea to buy a Corvette to sell for a profit. I put up the money ($2,300 + $900 for repairs = $3,200), he arranged everything, and about two weeks later we split a $1,000 net profit.
Given that he didn’t have the money and I knew nothing about cars, it was a great deal for both of us.
Be careful when doing business with friends, of course. It can lead to the end of a friendship if things don’t go as planned. On the other hand, many great businesses have been started by friends.
If you think that’s a possibility, you might want to read Forbes’ article on successful businesses started by friends for inspiration.
But make it a friend you implicitly trust. Also, look for friends who have complementary skills and knowledge for maximum success (you don’t need another you).
5. Loan Money To A Friend
As I mentioned at the start of this article, I used to be a bit of a loan shark with my friends. Why not? I’ve never lost a friend over a loan (and never lost a loan over a friend), in part because I kept it very business-like; I made it clear that I expected full repayment on time, and I put it all in writing.
I made some good interest loaning money to friends.
Before you start playing banker you might want to read up on how to loan money to family and friends, so you understand the risks and what you need to do.
For example, the IRS will assume a minimum interest rate for the loan, called the AFR, or Applicable Federal Rate, so you’ll want to charge at least that much. You don’t want to pay income tax on interest you didn’t collect!
And again, try to make the whole deal win-win, meaning something that you’ll both benefit from. The loans that best fit that description include loans for a down payment on a house, or for tools for a business or job, and similarly productive purposes.
6. Borrow From A Friend
Lending to friends is a way to make money, but borrowing from friends can be a great way to make or save money. For example, you might borrow from a friend to start a small business to make money, or to install solar panels in order to save money on your electric bills.
I’ve borrowed from family to buy a rental property, and I’ve loaned money to a friend so he could flip a house for a profit. In both cases everyone involved made money, either in the form of interest or profit.
But turning to friends for money can be tricky, so start by reading a bit on how to borrow from friends and family. For example, you’ll want to have a clear plan for repayment, specifying when and how much you’ll pay, but also noting where you’ll get the money to make those payments (“I’ll pay you when I can” is not a plan).
And always pay at least the applicable federal rate, or AFR, just to be fair. After all, your friend will have to pay taxes based on at least that much interest whether or not you pay that rate.
They’ll also be losing out on whatever interest they would have made in the bank.
7. Make Friends Into Customers
If you have any kind of business, consider how to make your friends into customers. You don’t have to be hard-selling them every time you talk, but be sure they’re aware of the benefits of what you have to offer.
Even if you don’t have a regular business there may be ways to make money selling goods or services to your friends. For example, if you make crafts you might sell them those (especially around Christmas time).
If you need extra cash you can sell your services as a babysitter, house-sitter, or pet-sitter.
I used to give rides to work to friends who were also co-workers, charging them a dollar each way, which covered all of my gasoline expense.
8. Use Your Friend’s Skills
When I built an addition on my home I hired a friend to help with the plumbing and electrical work, which saved me hundreds (possibly thousands) of dollars versus hiring a contractor. I’ve also had friends fix my cars for me.
Chances are good that some of your friends have skills and knowledge that can be put to use to save or make you some money. Be sure to regularly ask your friends what they know, and what expertise they have, so you’ll know who to call when the time comes.
Pay them, of course, but a friend is likely to help for a much lower cost than a professional. You also have skills, so you might trade services with a friend to keep the dollar cost of their help to zero.
9. Share Expenses With A Friend
Sharing an apartment or carpooling are examples of how you can reduce expenses by sharing them with a friend, but look for less obvious ways too.
For example, I used to give a neighbor a few dollars every month to share his garbage bin, which meant garbage pickup cost us each half as much.
Other simple cost-sharing strategies include sharing a magazine subscription, lending tools to each other to avoid the cost of buying ones you don’t have, and buying yard supplies together to get bulk discounts. If you’re really good friends you might even consider something like buying a boat together to cut the cost in half.
10. Work For A Friend
One way to use friends to make money is to get hired by them! Some of your friends probably own businesses and occasionally need help, so why not ask?
Even if your friends are not regular employers, you can always offer to work for them in various ways for an hourly wage. For example, you might offer to mow their lawns, clean their garages, wash their cars, or do anything else that will help them (and you).
If you’ve used friends to make or save money, tell us about it below … and keep on frugaling!